TPP: It’s not over

Trans-Pacific Partnership (TPP) is an ambitious and far-reaching agreement that has the potential to transform the global economy and individual countries.  

But, as U.S. Trade Representative Michael Froman made clear at last week’s announcement, this agreement is just a “first step.”  The reality is that many more negotiations are about to take place which will ultimately determine whether TPP ever becomes a reality, opening markets, and lowering barriers as envisioned by its architects.  

{mosads}Immediately after the negotiations concluded, the attorneys went to work in full force to complete the “legal scrub” of TPP to ensure that all of the words included in the agreement were actually agreed to and that each and every comma and semicolon are appropriately placed. This can become a negotiation in and of itself. Once the text is fully agreed to, it will be shared with a group of “cleared advisors,” private individuals who sit on the many committees advising the Office of the United States Trade Representative (USTR) and the Department of Commerce on trade and investment issues. The cleared advisors write reports advising Congress whether TPP is in the interests of the United States and a recommendation on whether the legislation should be passed.  

During this period there is often a separate, closed-door negotiation between USTR and the Senate Finance Committee and the House Ways and Means Committee which is how USTR and the Obama administration secure the necessary votes to pass TPP. Failure on this front means a failure of TPP.  

We can look back to 2006, when the Bush administration concluded trade agreements with Peru, Colombia, Panama, and South Korea only to have those agreements reopened and renegotiated when the Democrats took control of the House of Representatives in 2007. The so-called May 10, 2007 Agreement between the Bush administration and Congress led to the passage of the Peru Trade Promotion Agreement in 2007 and the ultimate passage of the South Korea, Panama, and Colombia agreements after a significant delay.  

The May 10 renegotiations were possible for these bilateral agreements but highly unlikely for TPP, which involves twelve nations in one agreement and covers a broad set of trade and investment issues.  Pushing for renegotiation could doom the entire agreement. The congressional dynamics are also different this time around with a Republican Congress and a Democrat president.  

It will also be important to watch the political dynamics in the other TPP countries – the upcoming election in Canada, the reaction of entrenched economic interests in Japan, and the ability of Malaysia to push forward an agreement in the midst of political upheaval.  

Even after each TPP party ratifies the agreement, there will be a period of implementation which could take years, including phase-in periods, phase-out periods for the highest tariff categories – some taking as many as 20 years – and changes to each party’s legal and regulatory systems on labor rights, environmental protection, and IP safeguards.    

There will then be negotiations on whether countries have implemented the items necessary for the United States to certify that they are in compliance and the commitments in the agreement will become operational.  In an agreement like TPP, entry into force will most likely be staggered based on each nation’s ability to implement its obligations.   The private sector will need to keep a close eye on the timeline of implementation to determine when they will need to act on issues of interest to their business. 

Sorting out these details and understanding the entirety of what has been agreed will take time. Even the parties are likely just now trying to determine how they will go about implementing the specific commitments undertaken and what timelines will be necessary to complete those efforts.

As this next phase of negotiations begin, there are still additional questions to be answer about the eventual impact of TPP:   Will TPP influence India, China, or other large economies to deal with issues like agriculture, intellectual property, environment, and labor in their trade agreements? Will TPP create pressure on non-TPP countries to speed up reforms to be eligible to join TPP at a later date? It will be interesting to see if the conclusion of TPP provides any momentum for the ongoing Doha Round at the World Trade Organization (WTO) and bolsters the outcomes of the upcoming WTO Ministerial in Nairobi at the end of this year.

Burr is senior vice president at Albright Stonebridge Group, served as deputy assistant US Trade Representative for South and Central Asia, where she negotiated trade, investment, and economic policy issues for the 14 countries of South Asia and Central Asia.